A Foundation Risks All of Its Endowment on Creating Jobs

DBL port­fo­lio com­pa­ny Eco­log­ic Brands makes the Chron­i­cle of Phil­an­thropy! Eco­log­ic is a phe­nom­e­nal exam­ple of impact invest­ing: the com­pa­ny cre­ates bio-degrad­able pack­ag­ing out of recy­cled mate­ri­als in a Cal­i­for­nia town that had a high unem­ploy­ment rate. Through its work (and impact phi­los­o­phy), Eco­log­ic Brands helps the envi­ron­ment and its com­mu­ni­ty get health­i­er. The orig­i­nal arti­cle in the Chron­i­cle of Phil­an­thropy is here (requires subscription). 

The Heron Foun­da­tion was found­ed in 1992 to help peo­ple move up from pover­ty and build wealth in poor neigh­bor­hoods. It invests rough­ly five per­cent of its endow­ment a year into caus­es that help elim­i­nate pover­ty. Twen­ty or so years ago the foun­da­tion’s board began look­ing for ways to gen­er­ate bet­ter returns while advanc­ing its mis­sion; the result could be con­sid­ered one of the ear­li­er ver­sions of impact invest­ing. Heron was even one of the found­ing enti­ties of a stock index fund com­prised of pub­lic com­pa­nies with sim­i­lar mis­sions: being good employ­ers and giv­ing back to the low­er-income com­mu­ni­ties in which they operate. 

Now the F.B. Heron Foun­da­tion is bet­ting its entire endow­ment on the impact model. 

In an efforts to elim­i­nate pover­ty, the New York-based foun­da­tion will ful­ly invest its $274-mil­lion endow­ment in the next five years. 

“We want to take a more activist pos­ture,” says Clara Miller, the foundation’s pres­i­dent. “We want to know whether the invest­ments we’re mak­ing are hav­ing a neg­a­tive impact or a pos­i­tive impact on the world.”

The foun­da­tion recent­ly invest­ed $1‑million in Eco­log­ic Brands, a com­pa­ny that pro­duces envi­ron­men­tal­ly friend­ly pack­ag­ing in a Cal­i­for­nia town with unusu­al­ly high unemployment.

Clara Miller says the F.B. Heron Foun­da­tion plans to be around “as long as pover­ty is a prob­lem that needs to be solved.”

“We’re mak­ing finan­cial invest­ments in orga­ni­za­tions,” says Ms. Miller. “Some of them are non­prof­it, and some of them are for-prof­it. Our over­rid­ing inter­est is in jobs and sys­temic change in the economy.”

Foun­da­tion inter­est in impact invest­ing is grow­ing, albeit cau­tious­ly. A third of the 211 foun­da­tions that grant $5 mil­lion or more have report­ed mak­ing impact invest­ments, and 23 per­cent say they’re con­sid­er­ing doing the same. 

Heron’s invest­ment in Eco­log­ic Brands fol­lows exem­pli­fies its new mod­el. Eco­log­ic is based in Man­te­ca, Ca., a small town with high­er than aver­age unem­ploy­ment. What attract­ed Heron to the com­pa­ny was its growth poten­tial and founder’s employ­ee-cen­tric approach to jobs–training her work­ers to improve their skills to increase their income. The com­pa­ny’s prod­ucts, envi­ron­men­tal­ly friend­ly pack­ag­ing inserts for prod­ucts such as laun­dry deter­gent, are find­ing an enthu­si­as­tic audi­ence as more “green” indus­tri­al efforts are becom­ing mainstream.